Intended for

Academic researchers, graduate students, and economists in the public sector interested in securities market liquidity, and in its interactions with asset prices.

Prerequisites

Microeconomics and game theory at the advanced undergraduate or first-year graduate level. Statistics, econometrics and asset pricing at the introductory level. Knowledge of the mechanics of securities trading and market structures and the measurement of liquidity; These topics are covered in chapter 1 and 2 of the book “Market Liquidity: Theory, Evidence, and Policy” of which all participants will receive an electronic copy. This book will be used as a reference throughout the course.

Overview

The course explains how security prices and liquidity are jointly determined, using both models and evidence from market microstructure, and how the design and regulation of security markets affects their functioning in terms of trading costs, informational efficiency, and volatility. Explicit attention is given to the transparency, fragmentation and trading frequency of security markets, to the pricing of liquidity and to the interaction between market liquidity and funding liquidity, especially in the context of financial crises.

Topics

Price dynamics and liquidity
Market depth
Fragmentation
Transparency
High-frequency trading
Asset pricing and liquidity
Financial stability and market liquidity

Marco Pagano is Professor of Finance at University of Naples Federico II and Director of the Centre for Studies in Economics and Finance (CSEF). He holds a B.A. from Cambridge University and a Ph.D. from MIT, and taught at Bocconi University and Imperial College. He is affiliated with the Centre for Economic Policy Research (CEPR), the Einaudi Institute for Economics and Finance (EIEF), and the European Corporate Governance Institute (ECGI). From 2004 to 2011 he was managing editor of the Review of Finance with Josef Zechner. From 2011 to 2019 he chaired the Advisory Scientific Committee of the European Systemic Risk Board (ESRB). From 2011 to 2017 he had an ERC Advanced Grant for a project on Finance and Labor. His research is in banking, corporate finance and market microstructure, and also covers issues at the interface between finance and others fields, namely macroeconomics, law and labor. He has published in top journals in economics and finance, and co-authored the book Market Liquidity: Theory, Evidence and Policy with Thierry Foucault and Ailsa Roëll.